International Finance Problems

1) Relatively high Japanese inflation may result in an increase in the supply of yen for sale and a reduction in the demand for yen.

A)true.
B)false.

2) If an actual put option premium is less than what is suggested by the put-call parity relationship, arbitrage can be conducted.

A)true.
B)false.

3) A weak dollar is normally expected to cause:

A)high unemployment and high inflation in the U.S.
B)high unemployment and low inflation in the U.S.
C)low unemployment and low inflation in the U.S.
D)low unemployment and high inflation in the U.S.

4) If Lazer Co. desired to lock in the maximum it would have to pay for its net payables in euros but wanted to be able to capitalize if the euro depreciates substantially against the dollar by the time payment is to be made, the most appropriate hedge would be:

A)a money market hedge.
B)purchasing euro put options.
C)a forward purchase of euros.
D)purchasing euro call options.
E)selling euro call options.